You may have seen this text pasted repeatedly on your Facebook or Instagram:

Initiative Q is building a new payment network. To get people to adopt it, they’re giving away significant sums of their future currency to early users. They require only name, email, and an invite from an existing user.

Initiative Q is a proposal for a new payment network using a private currency, which they aim to leverage into the “one global currency”.

It’s not a cryptocurrency — but a few people asked me about it, because it has the same smells to it, and they keep comparing themselves to cryptocurrencies. It also shares a lot of bad ideas with cryptos.

There’s no such thing as a get-rich-quick scheme that works — particularly one that badgers you to get in early. And the marketing is entirely pyramid-shaped.

But as far as I can tell, they’re completely sincere! It’s just their ideas that are bad — or don’t actually exist yet.

The people

Initiative Q was founded by Saar Wilf, who has past experience in the payments world — amongst other companies, he founded Fraud Sciences, which he sold to PayPal when it was part of eBay.

The other key participant is Lawrence H. White — an economist at George Mason University, who is heavily into Austrian economics, though he’s not a complete gold bug. White worked out the economics of the Q private currency.

The Q token

The Q token is a centralised private currency issued by Initiative Q. It’s presently worthless, and not exchangeable even on Initiative Q’s own servers — but they aspire to it being used in their nonexistent future payment network. At that point, they intend it to be freely exchangeable with dollars.

Get your pyramids early!

Initiative Q needs many committed users to ensure a meaningful network of buyers and sellers. If a critical mass is not reached, the project may not go forward. Because the rewards are only valuable once the system is functional, it is in everyone’s interest to get others to join.

The marketing is a straight-up pyramid scheme — you need an invitation to join, and then you and the person inviting you get some Q tokens, and you get five invitations in turn.

You are required to complete (unspecified) tasks to get your full Q token reward. They also stress the importance of getting in early — “joining at the very early stages requires real vision and foresight.”

So far it’s just signing up to get their made-up Q tokens — they haven’t asked for actual money, or anything else that’s exchangeable.

The signup process

I click on a friend’s affiliate link, and I get:

Initiative Q is building a social payment system. Join now for free and secure an estimated future value of $142,239

An undertaking of great advantage, but nobody — including us — to know what it is

The Initiative Q payment network concept is hard to critique — because not only does it not exist, they don’t have anything as yet, except the notion of “build a payment network and it’ll be awesome”:

The legacy payment systems we use today are hopelessly obsolete and creaky;

anyone with modern technology could come along and make a better payment system — if only they could get a user base;

the existing providers are just too bogged down and inefficient to keep up with a new upstart along these lines.

So they’re recruiting people with Q tokens as future lottery tickets, so they can get merchants — and, presumably, venture capitalists — on board by saying, “we have this huge number of users.”

But first, they need to get past the problem that none of this exists yet — everything in their pitch is completely imaginary — and they literally don’t have a plan yet.

The other problem is that nobody signed up to use Q as a payment processor — they signed up to get free money. Q still need to build their superior payment network before those people will use it.

Once Q build the payment network, and Q tokens are worth a dollar … they’re in the hole for the millions of Q tokens they’ve handed out — 14,000 Q to anyone with an email address. But I’m sure Q won’t suddenly declare the early tokens aren’t quite worth a dollar, or anything like that.

How could real-world payment networks possibly compete?

The centralised touch-to-pay cash card network was launched in the UK in 2007. It’s so ridiculously convenient that by 2017, it was more popular than actual cash. Most people would call that a success.

That network was launched by the obsolete and ancient banks and credit card providers — it turns out that, in reality, they put quite a lot of effort into keeping up with technology.

The Individual Pubs case study in chapter 7 of Attack of the 50 Foot Blockchain reveals how the payment networks can rapidly add a new protocol — they rent the terminals to the merchants, so they can upgrade them as needed. That’s how they put chip-and-PIN into place in 2006 so quickly.

The claims in Q’s payment pitch are very crypto-like, in that they claim obsolescence of a system they don’t appear to know already does what they’re offering:

“”For example, open your wallet and count how many different cards you have, and how much cash you have to carry around. The technology already exists to replace your wallet with a fast and secure digital payment method.” — if I open my wallet, it’s got a debit card, a credit card and my driver’s licence. I use the debit card as a touch-card for the Tube. If I wanted, I could put the debit card on my phone instead. Many weeks I don’t spend actual cash at all.

“There are many advanced payment technologies and innovations waiting to be deployed. Here are just a few examples: NFC on smartphones instead of a plastic card to authenticate account holders; MFA methods to make payments more secure; AI to reduce fraud; one global currency to eliminate currency exchange fees; digital transactions to make transactions faster, safer, and cheaper.” — all of these are in place right now, if you want them — except the “one global currency”, which is the thing Initiative Q are really trying to launch.

New payment networks do happen — Apple Pay launched in the UK in 2015, and Google Pay in 2016. These use a lot of what’s in the Q pitch — and have succeeded by providing convenient access to established financial institutions with experience in handling payments.

It’s utterly unclear what unsolved problem Q is meant to address. The incumbents have demonstrated their ability to adopt new technologies as absolutely fast as there’s a profitable edge in them — how do you beat that from first principles?

Ideas are cheap. Execution is everything.

The economic pitch: Initiative Q as private central bank

There’s no intrinsic reason for a new and better payment network to have its own private currency. But Q does.

In this regard, it’s comparable to cryptocurrencies — even before the mid-2015 transaction clog, Bitcoin’s merchant use case was negligible. Per chapter 7 of the book, merchants would typically adopt Bitcoin, see no use, and drop it.

As with Bitcoin, the point of evangelising the payment network is to make the currency more valuable — and make “number go up.” The Q-based payment network won’t work unless consumers and merchants accept Q tokens as the dollar-substitutes they aspire to being.

In their economic vision, Initiative Q seriously proposes that their two trillion Q tokens will eventually have $2 trillion of value — bootstrapped by the payment network.

Bitcoin bootstrapped itself up from nothing to thousands of dollars per bitcoin, with its only real market use case being drugs on the darknet. So stranger things have happened.

And, as it turns out, the crypto trading market doesn’t care about decentralisation — Bitcoin-style cryptocurrencies, ICO tokens and centrally-controlled cryptocurrencies like XRP trade in the same markets to the same people. A private currency that’s in a database rather than a blockchain may be just a step further.

There’s no mention of an exchange mechanism for Q tokens, though presumably they’ll be exchangeable for dollars at some point if merchants are ever going to take them.

You’d think a private currency with an M0 narrow-money cash supply of two trillion dollars would need some serious governance — for comparison, M0 for the United Kingdom was estimated at £481 billion as of February 2017. We usually have reserve banks for that sort of thing, with the best economists they can find, and close monitoring and questioning by governments, the press and the public, in the usual democratic manner.

What does a private company offer in this regard?

However, it is extremely important that the money supply only grows in proportion to the growth in the demand to hold Qs, and not for other reasons. For example, governments that printed money with abandon to fund their budgets (and in doing so transferred wealth from the citizens to government accounts by devaluing the citizens’ currency) created hyperinflation, and eventually made their currency worthless.

Good thing no private company ever just took everyone’s money and vanished with it. Particularly in the world of virtual digital currencies.

Fortunately, “Initiative Q’s monetary policy will eventually be overseen by a monetary committee that is directly accountable to all Q holders, and independent of the Initiative Q corporate entity.” So that’s nice.

Initiative Q founder Saar Wilf says: “We did not yet decide what will the backend settlement platform. So in the meantime we registered the ethereum tokens” — so they’re not part of the Q proposal as such, and there’s no ICO or anything.

Summary

Initiative Q appear to be quite sincere, and not crooks.

Their payment network isn’t even a plan yet.

Their economic plan is to do what a central bank does — as a private company, informed by conspiracy theory paranoia rather than experience.

The pyramid-scheme marketing is bad, and creates a toxic dump of personal data.

If you want to sign up for some private company magic beans, hey, why not — but tread carefully.

I wouldn’t invest in this company in a pink fit. Someone probably will, though — the founder has a track record of founding and selling companies.

The idea that there are inefficiencies just lying around to be optimised away is not so plausible when the incumbents already use all the ideas that Initiative Q put forward as future hypotheticals. This goes double when they have nothing for a pitch, except the concept of inefficiencies to optimise.

It’s not impossible they’ll get something up … but pure ideas are near-worthless. The hard part is always execution.

Ben from Initiative Q here. Thank you for this review! Just a few comments:

>Get-rich-quick / pyramid scheme

Definitely not our intention. It’s more of a possibly-get-a-bit-richer-slowly scheme… We are very clear there is no guarantee this will take off, and if it does it will take time.
Another important point is that the value to users will come from Q being gradually accepted as a better currency, in accordance with the “equation of exchange” in economics. There is no money coming from late users to fund early users – so definitely not a pyramid.
This is a common misunderstanding we get from users, and we’ll work on improving the messaging. (Note we haven’t officially launched yet)

>Privacy

According to the policy we cannot sell the data for the sinister purposes you mention, and neither could a company acquiring us.
Even if we could, it’s not worth ruining our reputation.

>No payment system exists yet

This is fully intentional and a main part of the plan. The main hurdle to innovation in payments is bringing a critical mass of buyers and sellers. Initiative Q is about solving that problem first. If the current campaign is not successful, there is no use moving forward.

>Once Q build the payment network, and Q tokens are worth a dollar … they’re in the hole for the millions of Q tokens they’ve handed out

This is explained in our monetary policy: Qs will be released for trade gradually, so they constantly stay at roughly $1 per Q. This prevents flooding in the early days of the system, and promotes trust in the long-term stability of the currency.
In other words: It’s not that Q will start at say $0.01, but that they’ll be $1, and only 1% can be spent.
We expect all Qs to be released (while maintaining the $1 rate) once Q becomes a leading global payment network.

>There is no real problem with payments today

Payment technologies do progress, but in cases where a critical mass of buyers and sellers are required it happens very slowly – no one wants to invest the time or money before they see others have joined. We hope to solve that deadlock by using Q incentives.
There are plenty of examples here: https://initiativeq.com/knowledge/payment-network
It’s true that some of these issues are being addressed today, but it’s happening very slowly, and on other issues there has been no progress for decades.

>their pitch to run this stupendously huge private currency is literally the pitch of paranoid Bitcoin conspiracy theorists — with governments as the big threat, and private enterprise as our saviour.

We are actually clearly stating that cryptocurrency monetary policies are unrealistic, and in order to succeed Initiative Q needs to copy government monetary systems.
That means that the Q currency will be controlled by an independent monetary committee, appointed via voting by all stakeholders in the Q payment network.

>No FDIC insurance

FDIC insurance was created to cover against fractional reserve risk. Initiative Q is not a fractional reserve system and therefore no insurance is required.

Hi Ben, happy to see this direct response, and I would be happy to see the Q Initiative succeed. That said, could you please clarify the central question here – namely, if a merchant accepts a payment in Q and want to trade it in for dollars, where do these dollars come from? I mean, if you aim to set the value of Q at $1, and let early adopters make use of (at least some) of their Q, which you’ve already handed out, then who’s injecting the dollars to back the Q ?

I’m not sure how this is in any way NOT a fractional reserve system: You’ve got more “records of money” than you’ve got actual money to transfer out. That’s literally what a fractional reserve system is. Just because you’ve got a “only the first 1% out get any money” policy doesn’t make it not so, and you’ve show no mechanism here by which any particular token gets priority over any other so you can’t promise people that put RealBux in are the first to get RealBux out. Which kind of leaves a gaping hole where “the first people to know that there’s a problem can cash out, everyone else gets stuffed” is literally your stated policy, and traditionally the first people to know there’s a problem are *you*, the people running the thing.

> The main hurdle to innovation in payments is bringing a critical mass of buyers and sellers.

Surely you need to know what the innovation is going to be, before enumerating the hurdles in the way of getting it to market?

The critical mass thing is certainly crucial to *adoption* of innovative measures, but it can’t stop you innovating. Your payments page is full of what David has identified – use cases that are already covered by other technologies, or which are flawed from the start.

You’re literally describing what apple, google and amazon already do and then declaring that you’re going to make these things standard in a way they can’t. You’re somehow going to have a bigger reach than literally the three richest and most valuable companies on the planet?

Who give them rights to invent fictional money? People are missing the point. When the public buys this kind of crap, they are in turn collectively making the inventors trillions of dollars out if your real hard earned cash. I see this as a big scam. At least services like PayPal actually are offering a service but they do not invent their own fictional currency in exchange for your real money.

That’s funny. So that at some hypothetical point in time then the alleged system is launched the current and future holders of whatever amount of Qs they hold, for which they paid NO real dollars, unless I missed something in the wonderful pitch, will step up and ask the dream team to exchange their treasure for the good old buck, right? So that finally, the ancient dream of getting something for nothing will finally prove itself valid, right? Unless you, of course, will at some point in time hit them with a tab, especially funny that those joining late will be disadvantaged by being asked to pay more or for the same amount of Qs, or so it seems. After all, you have promised to hold a sufficient amount of bucks to not only support the “stability” of the exchange rate but also to satisfy the customers right to receive a real buck at any time they wish to! Walla, miracles happen! Firstly, where does the “reserves” money come from may I ask? Secondly, where is an approximation as to how much would it take to build this revolutionary wonder and where all that capital will come from as well, may ask?

So I’m guessing the reserves and the dollars are coming from rich investors who have more money than they know what to do with. If so- Brilliant, finally a way to start distributing unnecessary wealth.

Thanks for the information; at least I have some of my doubts clarified. Good to read that at least these guys seem sincere and not crooks. I was wondering who were the actual founders and glad that you have that answered too.

They give you “free money” for registering and spamming your friends, but the key is then you’re bound to use the transaction system for a while until “slowly, eventually, maybe” that free money gains the promised value.
That just binds you to stay and maintain the system for fear to lose something that never even existed to begin with.
Value could be (speculatively) built over time by it’s user base, but the system’s use-fee profits would go to a private company, either if they keep their valuation promise or not. Not to mention authoritative control.

That’s pretty smart.

Thank you to bring my attention to the worst-case “susceptible network of suckers” scenario, I did overlook that.

I heard a joke once, which I’ll rephrase poorly. A father goes to Bill Gates and says, will you marry your daughter to my son, he’s the vice president of . And Bill says, why if he’s the VP, sure. And then the father goes to the corporation and says, will you make my son a VP, he’s Bill Gates’ future son in law, and they say, why if he’s Bill Gates future son in law, sure. So, this is a rather clever privilege escalation attack. It’s the magic bean sauce that made me think to go in on it, plus I respect the person who gave me the link, but now after reading this I have some buyers’ remorse. At least I learned today that I am probably a sucker, that’s some good information, I don’t know how long I’ll remember it for.

This is stupid because for it to be valued at $1 you will have to be able to buy and sell Q at $1. What lunatic will come in and buy 1 million Q at $1 when you have given literally thousands of them away.

The only way this is viable is when you have an inexhaustible amount of dollars to throw at it to float it in the first place and if you are giving them out at the rate of 145000 per person that just isn’t going to happen. If 1000 people sign up then that’s a billion right there.

The ‘free money when you join’ pitch sounds very much like the free cash gambling websites offer to get people on board. Complete with the up-front invisible hurdles to actually getting the free cash until you have dropped enough real money into the system to pay for your own lunch.

My problem with this “equation of exchange” global payment initiative that’s supposedly free from currency exchange rates, is that they’re still market dependent, and therefore not really global. It’s still subject to the same trappings of any other currency.

Example: Pretend for a moment that McDonald’s gets on board with this new currency. A Big Mac in America isn’t the same price as a Big Mac in England. So, if a Big Mac is Q3.5 in the U.S. and Q2.3 in Britain, then it’s hardly a solution to the problem when you can just pay in local currency that you would normally experience in real life anyway – and that currency is never going to go away, no matter how much someone wishes it to be so.

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The content of this site is journalism and personal opinion. Nothing contained on this site is, or should be construed as providing or offering, investment, legal, accounting, tax or other advice. Do not act on any opinion expressed here without consulting a qualified professional. I do not hold a position in any crypto asset or cryptocurrency or blockchain company.